Oral evidence

Taken before the Environment, Food and Rural Affairs Committee

Poultry Farming in the UK Sub-Committee

on Tuesday 17 June 2003

Members present:

David Taylor, in the Chair
Mr Austin Mitchell

Diana Organ
Mr Bill Wiggin

__________

Memorandum submitted by British Egg Industry Council

Examination of Witnesses

Witnesses: MR ANDREW PARKER OBE, Chairman, MR ANDREW JORET, Deputy Chairman, and MR MARK WILLIAMS, Chief Executive, British Egg Industry Council, examined.

Q114  Chairman: Welcome to the members of the British Egg Industry Council. We have Mr Andrew Joret, and Mr Mark Williams whom I have met before at a breakfast across the square some months ago, and Mr Andrew Parker, the Chairman. Did I understand correctly that you had in mind the possibility of making a very brief initial statement? There is no necessity for that but, if you want to do that, it is up to you.

Mr Williams: It was really to set the scene; it will be very brief, about one minute's duration.

Q115  Chairman: Then, without hesitation, deviation or repetition, you have a minute to summarise what you may already have told us in eight elegantly crafted pages as your written submissions.

Mr Williams: I would like to stress just two points. The British Egg Industry Council has a political arm where it represents the whole of the UK egg industry right through from all stages. We also have what we call our commercial arm which is the Lion Quality Scheme and that accounts now for 80 per cent of all eggs produced here in the United Kingdom. We believe that we should be used as a model for all other sectors of agriculture. We believe that we have done everything that has been asked of us by successive governments. We have become more efficient by reducing costs; we have become innovative in all the products we can produce; and we respond to consumer demands. In other words, we are an unsubsidised industry, so we have to stand on our own two feet and are subject to market forces. We have the Lion Scheme. We believe we are a very responsible industry. We have effectively eliminated salmonella from UK-produced eggs. We also have issues which are affecting our success and these issues at the present moment in time are based on the amount of legislation which we face as an industry and, by far and away, the overriding one is new animal welfare legislation which is going to add significantly to our costs, not only capital costs which are in excess of £400 million but also our running costs are going to increase and this at the same time as we are faced with a round of world trade negotiations which are set to lower import tariffs. So, we see our competitiveness being very, very seriously undermined.

Q116  Chairman: Thank you for that summary of your executive summary. If I can pick up that same theme. At paragraphs 5 and 6 of your executive summary, Mr Williams, you make it clear when you talk about competitiveness that, in your view, and I quote,"... the greatest threat" to the future competitiveness of the industry "is from implementing new animal welfare legislation at the same time as world trade is further liberalised.." Is that really the case? New welfare legislation is trickled in over a very long period and trade liberalisation likewise happens very slowly. Why can your industry not look forward over the decade during which some of this liberalisation and some of these welfare standards are being introduced and get one to reconcile and live with the other?

Mr Williams: If I can make two points and then ask my colleague, Andrew Joret, to come in. The first point to note is that the egg industry is already subjected to a European directive and that increased the cost of production back in 1995 by some three-and-a-half pence per dozen. Industry took that on board and took it forward ---

Q117  Chairman: Three-and-a-half pence per dozen on a cost base of what previously?

Mr Williams: Forty pence.

Q118  Chairman: So, we are talking about eight per cent or something like that.

Mr Williams: But what has happened this time round of course is that, in 1999, a new European-wide directive was agreed. This is going to make fundamental structural changes to the European egg industry of which we are an integral part, being the sixth largest producer. That is going to ban what is in effect the conventional cage to be replaced by so-called enriched cages which provide birds with more space and more height, as you heard from Peter Stevenson last week but perhaps we can come back and touch on that in a few minutes' time. I think I noted in our introduction that our greatest problem of course is that we are an unsupported industry, so we are subjected to the vagaries of the marketplace which each day becomes progressively more competitive. It has been said to us on more than one occasion by colleagues of yours and others, "Well, you have ten years to implement this" but of course the investment decisions are made - cage designs will last 20 years quite easily now with modern equipment and modern materials etc - but all the time we have other European countries and third countries knocking on our doors here in the UK and knocking at our customers' doors offering cheaper eggs and egg products and the problem is of course that, whilst we take a responsible attitude and build in consumer concerns on food safety and animal welfare, these so-called third countries do not incorporate the same charges and that is really the fundamental difference.

Mr Joret: The industry's costings have really taken into account the long timescale, the lead into 2012, and what we have actually done is to look at what we think the position will be in 2012. The costings side of it is of course very easy to do accurately. What is not quite so easy to do is secondguess where the market will have moved to in 2012. Our view is that, if you take the egg market now, we are about 70 per cent caged/30 per cent non-caged and, by 2012, our best estimates are somewhere around about the 50/50 mark, so that is going to be a substantial growth in the non-caged sector but we believe that the caged sector will still be a significant feature of the market in 2012.

Q119  Chairman: Is that growth in the non-caged sector driven entirely by market consideration/by consumer demand?

Mr Joret: Driven by market, not by legislation.

Q120  Chairman: No, but by consumer demand?

Mr Joret: Yes, but we still see that what we call the caged egg, the value egg, is still going to be a significant feature of the major retailers as also it will be for eggs for processing, so we have taken that into account. At the same time, what we have looked at is what the further relaxing or liberalisation in the next WTO round will do to tariffs and, under various scenarios, we can then paint a distinct picture that we will be very uncompetitive, particularly as far as eggs for egg processing is concerned and that is really our major concern. On the one hand, we have our costs rising because of welfare considerations here in the UK and in the EU and, at the same time, greater liberalisation.

Q121  Mr Wiggin: You talked about 50/50 at about 2012. I want to ask whether or not your view is that consumers will demand to buy free range or barn or whatever types of eggs, but that does not take into consideration the huge amount of egg powder, eggs used for, say, quiches and all the secondary type of egg usage, if you like. So, when you said 50/50, how did that really break down? Is that just eggs that we see in shops or is that usage as a whole?

Mr Joret: That was a view on the egg market as a whole. I did say that our current egg market is roughly 70/30, that is the national production statistics, but if you look at where the non-caged eggs are sold, it is clearly at retail where retail is already about 60/40 but, in the processing sector, over 90 per cent of the egg used in processing is caged as we speak and we have taken a view on how those markets will develop over the next nine years.

Q122  Mr Wiggin: Can I take the figures forward from 60/40 and 90 per cent and you think works out at roughly 50/50. I think there is quite a lot of speculation there.

Mr Joret: It is of course a crystal ball gazing job but we think that, in the retail sector, it will probably be something like 40 per cent caged, that is the value end of sales in 2012, which is less than half, but, in the process sector, it will still be well over half, probably two-thirds.

Q123  Mr Wiggin: And that does not take into consideration all the producers of food rather than eggs who will simply move their production abroad and simply return finished products such as a ready-made quiche in the UK?

Mr Joret: The biggest risk to us actually, as you rightly point out, is egg powders which can be traded very readily on a world-wide basis where transport cost is low, there is no requirement for refrigeration and there are no real food safety issues certainly in terms of bacteria anyway with the dried powder.

Chairman: So you are saying that enriched cages will not enrich the industry!

Q124  Mr Mitchell: You do not even know whether you will be allowed to use enriched cages after 2012.

Mr Joret: The legislation currently of course allows it and we have just had ---

Q125  Mr Mitchell: Yes, but after 2012.

Mr Joret: Our current legislation does allow it after 2012.

Q126  Mr Mitchell: We have Elliott Morley saying that he does not know yet.

Mr Joret: The directive is required to be reviewed by the EU in 2005 and the outcome of that review will of course be important to us. Bear in mind that, when the directive is reviewed, it will be reviewed by an EU of 25 Member States, not 15, so we are going to have a number of different opinions in there when that directive is reviewed and I think that Elliott Morley in his statement, which we welcome very much, said that whatever we did would be done on an EU-wide basis and that is really the important point for us, not for the UK or even England on the devolution to go ahead of EU-based legislation.

Q127  Mr Mitchell: You gave us some costs earlier on but what is the extra cost of putting all the caged birds in enriched cages?

Mr Joret: Just over £400 million. Of the total cost of meeting the directive, I think that just over £400 million was due to rehousing the caged element of the production and the balance was due to changes affecting both free range and barn production.

Q128  Mr Mitchell: And the cost there is presumably that you get fewer cages in the same space.

Mr Joret: You do indeed, yes. Roughly speaking, you will get about two-thirds of the number of birds. Therefore, you need poultry housing for another one third of the birds.

Q129  Mr Mitchell: In your evidence, you are defending enriched cages. "Enriched cages" is a terribly phrase. It is rather like this building as opposed to that building. You say that they allow the birds to display a wide range of normal behaviours. If they permit a wide range of normal behaviours, which ones do they not permit?

Mr Joret: You cannot question that an enriched case offers a significant advantage over a conventional cage. The directive that set in train enriched cages is only four years old, it came out in 1999, and, when the directive was actually produced, the dimensions as far as the enriched cage came from research work that was being done in Sweden actually on a very small number of birds. What we have seen in practice since the directive was published is remarkable development and ideas as to what constitutes an enriched cage. Our own company has been a partner in Defra-sponsored research into enriched cages, we have our own trial house, and we feel that we have learned a lot as practical producers about enriched cages and I think that we have moved on. What is now looking very attractive to us rather than when the directive was first published is in fact what we are calling much larger colony cages. They still have the same space per bird but, because it is a much larger colony - and I am talking here about colonies of 40 or 60 birds - you can then allocate space within that very large cage far more effectively, so you have a very good nesting area and a very good scratching area, and you can then actually observe and see the birds nesting. Over 90 per cent of the eggs would be laid in the nests and that is clearly telling you that it is quite a high driver for the birds to do that and they respond. It is not as if birds can read; we do not label it "nest"; the birds use what you provide. You can see dust bathing and scratching going on. Likewise, the use of perches is tremendous. At nighttime, all the birds will be asleep on the perches which is what they would presumably do in a natural environment.

Q130  Mr Mitchell: The Farm Animal Welfare Council has defined five freedoms. Are all those five freedoms attained in enriched cages?

Mr Joret: We believe that they are and that is quite an interesting analysis because one thing that we are looking for as an industry actually is an assessment of all the different production systems against those five freedoms. It has not been done. The Farm Animal Welfare Council last reported on commercial eggs in 1997 and I think it would probably be very opportune for another look-see at the systems of production that are now available. We certainly believe that the enriched cage, as it is dreadfully called, does in fact meet the five freedoms.

Q131  Mr Mitchell: In that case, why are the Farm Animal Welfare Council calling for further research on enriched cages?

Mr Joret: I think because this is very much a fledgling issue. An enriched cage has only been with us for four years and the improvements in design are already evident and I think that now would probably be a good time for them to have a look at it.

Q132  Mr Mitchell: To what extent would you accept that the free-range systems, for instance, have higher levels of animal welfare than the caged systems?

Mr Joret: I think it is a balance. There is not actually a perfect system of egg production. Both our own Farm Animal Welfare Council when they reported in 1997 and the EU Scientific Veterinary Committee when it reported in 1996 actually listed all the different systems and listed pros and cons of each of the systems. There is not a perfect system. I think that if there were, the industry would have readily adopted it. What we have to look at now is whether the new systems that we are moving to in enriched cages are a significant improvement.

Q133  Mr Mitchell: What is the advantage of each, free range as opposed to enriched cages?

Mr Joret: I think that, in free range, clearly you have the ability for the bird to go outside, although that in itself is not something a bird necessarily sees as a strong issue. The ancestor of the birds we use is the wild jungle fowl and its natural habitat would be scratching around on the forest canopy and not in a wide open grass field. They actually do not like wide open spaces. For those running free-range systems nowadays is all about enriching the range by trees and other forms of cover to actually allow the birds to go outside. The downside of the alternative system, the loose-housed systems, is that you are dealing with very large colonies, colonies of 2,000 or 3,000 birds let us say, and so far we have not yet been able to do away with the need to beak trim those birds because of the risks of feather pecking and cannibalism. We still see, as practical producers, significantly higher mortality levels on our non-caged systems compared to our caged systems.

Q134  Mr Mitchell: Do you?

Mr Joret: Yes.

Mr Mitchell: Last week, Compassion in World Farming was pretty critical of enriched cages, largely on the grounds that they did not give the birds enough room.

Chairman: They did said it did not go far enough.

Q135  Mr Mitchell: In that case, why not enrich them a little more and make them a little bigger? I just thought, from my own look at poultry farms in the area near Grimsby, it is a fairly miserable spectacle with all these poor bloody birds sitting there. They cannot really move much and their limbs do get broken. So, why not just make the cage bigger? Why should there be a limit to enrichment?

Mr Joret: There is a significant increase in space envisaged from 550 square centimetres to 750. Do not forget that in the house within a barn or within a free-range system, we currently stock at 11.7 birds a square metre and that falls to nine. That 11.7 is 850 square centimetres. So, actually, the space allowance between a barn bird in its house and an enriched cage bird is not ---

Q136  Mr Mitchell: It is still not much.

Mr Joret: What I am saying is that the space allowance is not that different between the two systems when it comes down to it.

Q137  Mr Mitchell: Are the limits on enlargement simply economic?

Mr Joret: Yes, clearly.

Q138  Mr Mitchell: Are there practical limits in which it does not improve the lot of the bird if it gets bigger?

Mr Joret: I think that those key questions are what the research is actually looking at because there is a great deal of uncertainty in this. Is there actually a welfare benefit between 550 and 750 square centimetres? There is actually no evidence to say that there is.

Mr Williams: There is one other issue which perhaps ought to be mentioned here and that is that, as Andrew said, the larger the colony you get, the less control you have over the birds within it. The danger is of course that birds can then start feather pulling which can lead to cannibalism and obviously mortality and, as someone rightly told me one day, mortality is the ultimate welfare insult to a hen. There is a balance to be struck. One of the important points to note about animal welfare and the directive we have is that these costs we face are not just on cages, we are not just looking after the move from conventional to enriched cages, the costs will go up also in the non-caged systems as more space is given to these birds. You referred to the Farm Animal Welfare Council and they are the first people to readily admit that there is an inextricable link between animal welfare and economics and obviously there is a balance there that has to be met in the confines of the industry we operate in today.

Q139  Mr Wiggin: There is one thing that most people, particularly people concerned about animal welfare, have not really taken on board and that is that you were talking about enriched cages of 40 birds and that is very different from the single or maybe four birds per cage concept of battery farming that most animal welfare organisations have in mind. What are you doing to educate these people because we are talking about a significantly different environment for that chicken to live in?

Mr Joret: As an industry, we are actually inviting as many people who are prepared to come and see and have a look at the sort of systems we are talking about. We have had quite a number of MPs come to visit our facilities to actually look at this and we have also had, for example, the poultry issues group of the Farm Animal Welfare Council who came to see this unit last year.

Q140  Mr Wiggin: Big Dutchmen advertising enriched cages are not advertising the sort of cages you have just described. There needs to be quite a lot of information passed about this amongst concerned parties, but also I think what you talked about when a chicken dies as being the ultimate failure, I think that everybody is at one on what we actually want which is a better life for the hen, nobody more so than the farmer because happy hens lay more eggs. It is not complicated science. So, we need to know more about this research on enrichment and why it is so much more beneficial and that is not coming across at the moment.

Mr Joret: That is what we were pushing in our response to Elliott Morley during his consultation on his proposal to ban enriched cages in England only, the fact that it is still ongoing and that we are on a steep learning curve on this particular issue.

Mr Parker: Our representation to Mr Morley was exactly that, that what we were seeking was a proper review in 2005 when we had completed this research. I am sitting not at the commercial end of it and what was envisaged five years ago for enriched cages is very, very different to what we are seeing today and it might move on again. The comments you make are all being recorded and will be looked upon from both bird welfare and the consumer point of view.

Chairman: I am going to move on to Diana Organ in a moment on welfare directives, but are we being anthropomorphic in all of this? Bill is talking about happy hens laying big brown eggs or whatever ---

Mr Wiggin: More eggs.

Q141  Chairman: And Austin talked about miserable hens being cramped into dark corners and you said, Mr Joret, that in fact we misunderstand this and that they are not many generations removed from jungle fowls who were happier pecking away in confined spaces. Can we be that wrong?

Mr Joret: I think that we have learned a lot about bird behaviour, particularly through managing the non-caged systems because they have been a much greater problem as far as the industry is concerned to manage satisfactorily. We do have this issue that mortality is still higher in these systems than in caged systems and those of us who actually work with birds like that certainly realise that, even though they are many generations away from their ancestors, there has been no genetic selection applied to behaviour, so why should they be really significantly any different to their natural ancestors?

Q142  Diana Organ: The case that you were talking about seemed like a cocktail party for hens, sort of 40 gathered together, some sleeping and some eating, as a sort of super-duper enriched cage that they live in. What percentage of the industry would you see being in that kind of environment, say, in three or four years' time?

Mr Joret: Practically, I would say not a lot. The reason being that we have conventional cage as we have now ---

Q143  Diana Organ: And that is overwhelmingly where the industry is, is it not?

Mr Joret: That is right, 70 per cent of the industry. Because of our forecast on growth in the market or changes in the marketplace, what we will see over the next few years is greater investment in non-caged systems, mainly free range. Barn is the Cinderella that nobody understands. Once the directive is reviewed, most producers will actually wait for the review of the directive and see what happens. Then I would envisage, from 2005 onwards, as people have caged units that they envisage they are going to keep forever, they will want to start replacing them. That is I think what is going to happen. There are some very small commercial units of enriched cages going in in the UK this year - I am aware of that - but they tend to be for very small producers. I think that the majority will wait until after 2005.

Q144  Diana Organ: You made a very clear case as to why the implementation of Directive 99/74 is very difficult for your industry at the moment because there are not only the capital costs but the running costs and the WTO. You put forward a very strong argument there that the industry really could not sustain that without financial assistance. How then did the industry manage to implement the Directive 88/166?

Mr Williams: Basically because, at that particular point in time, the UK industry was following breed standards, if you like, and one of the optimum efficiency factors is egg production/feed intake. So we were there or thereabouts on space per bird anyway, so it was not a case of making huge changes. However, as I said earlier, we are having total structural changes in the industry. You are actually prohibiting a system of production which has not happened before.

Mr Joret: There is a further point that I would like to add to that in that one of the requirements for an enriched cage is a minimum height of 45 centimetres across the whole of the cage. Current conventional cages will be at the back perhaps 38 or 39 and, at the front, they will be in excess of 45, but that height requirement means that every conventional cage in Europe is scrapped because it is not practical. You cannot change cages, cut them and space them. From an engineering point of view, you cannot do it. So, that does mean that everything has to start again. That is why the cost of this directive is so great. You cannot convert what you have, you have to start again.

Q145  Diana Organ: The drive behind the directive is obviously a concern about improvement of animal welfare and we have had a discussion and you have made it quite clear that you would like decisions relating to animal welfare and how it should be based on sound science and not on emotion and hear hear to that. I am just a little concerned in that we had very strong evidence last week from Compassion in World Farming. Where are you getting your sound science from? Is it the same source that we heard from last week or is it different? Mr Joret, you talked about Defra-sponsored research that you were looking at now to look at behaviour and welfare. Where else are you getting your sound science from to make your argument?

Mr Joret: I would obviously be very interested to hear Compassion in World Farming because, to my knowledge, there is no published research yet on enriched cages. There is a lot of research currently underway. We in the UK, through the Defra work being done at Gleebe Thorpe and with industrial partners, are looking at some aspects. I am aware on a European basis that research is being undertaken in Holland, Germany and Spain into different aspects of enriched cages and hopefully all this will be brought together for the review of the directive in 2005.

Q146  Diana Organ: Did you hear the evidence last week?

Mr Joret: I did not but my colleague did.

Q147  Diana Organ: There was a very strong line but there was never really any questioning about where the research was based for this argument.

Mr Williams: Can I sort of move it back a stage to answer your question. I think what Peter Stevenson was forwarding, a lot of the evidence he quoted was from work which was done many, many years ago. Andrew mentioned that the directive as it stands at the moment is only four years old and the development of design in enriched cages has come on leaps and bounds since then. On a pan-European basis - that is what we operate now - you have the Commission's Scientific Veterinary Committee that produced this report on the welfare of laying eggs in 1996 and that said very clearly that there were advantages and disadvantages to all systems of egg production. We totally agree with that. It is our job as an industry and the recommendations which we are making to our members is that we seek to maximise the advantages and minimise the disadvantages, but the work that is coming out from all the different centres around Europe now on enriched cages is very, very exciting. However, we are not naive enough to think that what is happening today should be it. Things are moving on. We have the review of the directive in 2005 and, as Elliott Morley has stated publically on the enriched cage consultation, we will look at the situation on a pan-European-wide basis in 2005 and of course that is what we would like.

Q148  Diana Organ: One of the other concerns people have about animal welfare is to do with this issue of beak trimming which sounds horrendous because one always thinks that this is not just like cutting your toenails, it is almost like pulling teeth. I wonder if you could say a little about what the industry is doing to improve the treatment of hens when they are having beak trimming done and whether it is a real benefit to the welfare of the colony and the hen. Must this thing be done or is it something like tail-docking of Boxer pups - we have always done it because we think it is a good idea and it looks good? You talked a little about how, in your large colonies, you still had problems with pecking one another. What are you looking at regarding the incidence of feather pecking because the two together seem to be a natural activity but, at the same time, you want to stop it. It is a little like small children fighting, is it not?

Mr Parker: Potentially. There is a great deal of work being done on beak trimming and to avoid having to do it. It is not done because the industry wants to do it, it actually is a cost that we have to incur to actually do it, but it is being done as a least worst option as we speak at the moment. There are a great number of scientific papers on feather pecking and cannibalism and the reasons for it are multifarious.

Q149  Diana Organ: Not overcrowding?

Mr Parker: Not in itself, no. That is not necessarily the issue. It is a whole host of issues such as light intensity, it can be feeding, it can be the genetic strain of bird being used and so on. There is in fact a working party which Defra have organised looking at beak trimming and an industry action plan is being drawn up as we go forward to avoid the need to do it in the future. Personally, I think that one of the biggest single issues is the strain of bird being used. Therefore, this work includes the breeding companies that produce the birds we would use commercially and they are having their input into it as well.

Q150  Chairman: In your summary and indeed in the early comments that Mr Williams made, you were concerned about world trade liberalisation and the removal of tariffs in particular. In your evidence, paragraphs 50 to 52, you suggest that four of the eight different types of eggs should be exempted from tariff cuts. That would be unique. How on earth can you justify that?

Mr Williams: We would justify it on the fact that the Council of Ministers - the Commission proposed the directive, the Council of Ministers obviously passed it - have decided to prohibit the production system in the European Union. To my way of thinking and I think to the thinking of most members of the public, they will find it abhorrent that a system which they regard as cruel in the European Union, yet the said same egg and egg products are still allowed to come in from countries outside the European Union ... It is totally morally wrong. I think that we are all realists, if you like, and the Commission have told us that they are not able to prohibit on the so-called process production methods. Therefore we are faced with the scenario that, unless some help, whether it is in the form of tariff protection or whatever, is given to the UK/EU egg industry, then we have very, very large problems, in particular on those dried product lines which we talked about earlier.

Q151  Chairman: What are the import tariff for eggs and egg products at the moment abroad?

Mr Williams: They are just under 50 per cent. They vary. We have eight egg tariff lines ranging from eggs in shell right through to the liquid ---

Q152  Chairman: And the range is approximately ...?

Mr Williams: Ten per cent-ish. I am not wholly sure off the top of my head now.

Q153  Chairman: But that is the typical range of tariffs?

Mr Williams: Yes. Stuart Harbison, the Chair of the WTO negotiating committee, proposed three differential cuts, if you like. For those who have tariff rates in excess of 90 per cent, there should be obviously a larger cut from those the other way round. Ours falls in the middle band and Stuart Harbison is proposing a 50 per cent tariff decrease. That would just be a total disaster for our industry. We have done scenarios which we forward to the committee and which we asked a respected Dutch poultry economist to carry out - obviously paid for by the industry just to make that clear, but it was an independent study -and that showed very, very clearly that, on the dried lines, we are in real, real problems. We are totally uncompetitive with whom we perceive to be our major competitors come 2012.

Q154  Chairman: What proportion of EU egg consumption enters the community as far as you are aware at the full tariff rates and what proportion of the reduced rates are negotiated by GATT?

Mr Williams: At the present moment in time, the EU is more than self-sufficient in eggs, obviously notwithstanding the problems going on with Avian influenza on the continent. We do receive imports. Very few imports of eggs in shell come in, purely and simply because it costs money to transport eggs around the world when they have the water still in them. Let us look at the tariff rate quote, if you like, which is half the full tariff rate. Depending on the year and the market demand for those particular eggs coming in to be made into products, it would be anywhere between 50/60 right up to 100 per cent, as I say depending on the demand. At full tariff rate, at the moment very little comes in but, as we were saying earlier, the issue is that there are structural changes coming in the industry which will alter the whole fabric of the way in which we produce eggs in the future and that is the danger. It is looking to the future and our members of course have to be making investment decisions now or thereabouts now and they want to be able to make sure with some certainty that they are going in the right direction.

Q155  Chairman: You justify the continuance of tariffs, at least in part, because you express the fear that non-EU producing countries are not having to comply with animal welfare, environmental considerations, quality and so on that apply to EU countries and specifically the UK. Were you here last week when the British Retail Consortium gave evidence?

Mr Williams: Yes.

Q156  Chairman: So you heard what they said about the retailers having strict specifications in these various areas. You are suggesting that there are imports reaching the UK which do not comply with standards which the BRC say their members have in place, so where are the breaches occurring?

Mr Williams: Certainly we produced a report some months ago which compared our competitiveness, we say, with our major third country, the USA for example, and that showed basically that the US still follows practices on animal welfare which are prohibited in the UK EU, but also they are still allowed to feed hens with meat and bonemeal, something we do not do here at all. We have other issues like tallow, for example, which we do not use over here which is still widely used. In India, egg powers have had problems over the previous years with pesticide residues being found in the egg product, so the Commission has taken action. So, they do not have the same form of controls which are placed here on UK egg producers.

Q157  Chairman: Say that the non-EU production's standards of welfare, environment and food safety were demonstrated to your satisfaction, would you then be willing to compete without the protection of tariffs?

Mr Williams: We would be very cynical if we were to sit here before this Sub-Committee today and say that we were just being protectionist. We are not. We have had to stand on our own two feet from day one as the egg industry. All we are saying is that we want equal trade and, at the moment, we certainly do not have that and, with the way things are mapping out for the future, things are not going to change and that is why we consider it so very important to be able to come and talk to you today. If an egg or an egg product is produced in a country, a third country, that is produced to the same animal welfare standards as us and it could be guaranteed - and I stress the word "guaranteed" - that those hens have been not feed on products which are prohibited here in the UK EU, then I do not think we would have any cause for complaint.

Q158  Chairman: Broadly, what proportion of your operational costs are feed?

Mr Joret: About 16 pence out of 40 pence.

Q159  Chairman: So, about 40 per cent?

Mr Joret: Yes.

Q160  Chairman: Will those feed costs not reduce under liberalisation?

Mr Joret: Yes, they will and in fact the paper that Mark referred to which was done by the Dutch Economic Institute actually assumed a five per cent cut in EU feed costs as a result of really coming out of the mid-term review, so that actually was built in.

Chairman: Can we move onto an area which we have not really touched on in any detail and that is the environment.

Q161  Diana Organ: You say that you support measure to protect the environment and I wonder if you could just give me a little guidance about the fact that the Integrated Pollution Prevention and Control rules state that all intensive livestock producers must apply for a licence, as you know, by 31 January 2007 and that all new installations already require a permit before they can carry out activities. I wonder if you could tell me if you are aware of any application for IPPC permits from the egg sector and have you had any response from people in the egg sector regarding whether it is straightforward, difficult or whether they are having problems with it and also whether there has been a benefit for the company going through this process or whether it is all bad news on all fronts.

Mr Williams: I think that we have some real concerns about the IPPC directive. Many of the concerns are the fact that it comes in conflict with other legislation, which perhaps we could come back to in a minute. Certainly, I am aware of one company that has made an application for a new unit, so obviously comes within the process now. They found it very tortuous; there was a huge amount of bureaucracy and a lot of staff time was spent on discussing with, and it was not the Environment Agency, as it happens, it was SEEPA up in Scotland, so it was a little one step removed, if you like. They have been on a learning curve and I think that SEEPA have as well. I know that concerns are of course that the full-cost recovery basis which is being put in place is going to have a huge financial burden and I believe that we have provided the Committee with some figures as to what it would mean on a per annum basis to a medium size and a large farm and I think it was £3,500 per annum.

Q162  Diana Organ: So you are not really satisfied with the standard rules for IPPC, are you, that it will minimise costs and regulatory burdens?

Mr Williams: If I were to say that it is better than what the alternative was, I think that would be fair enough. We have spent an awful lot of time as an industry - both sides of the industry, meat and eggs here - discussing with the Environment Agency to get things right because we are different. If we look at this politically, we were "picked on", shall we say, in terms of the emissions coming out of egg production and broiler units which were much, much lower than, for example, dairy cattle were emitting, but of course we were clobbered with the directive back in 1996. Chairman, would it be opportune if I were to mention our concerns about conflict between various pieces of legislation, very briefly?

Q163  Chairman: Yes.

Mr Williams: We have animal welfare legislation which is moving industry away from cages, shall we say, but we know and science has shown very clearly that, if you want to reduce the levels of ammonia, then you dry the manure very quickly and the caged unit is best for doing that. We also have conflict within environmental legislation under the Integrated Pollution Prevention and Control regs as well as this climate change levy and again, to reduce the volume and obviously the emissions of ammonia, you dry manure and, if you are drying manure, you are using electricity to drive the fans and then you are getting penalised by the climate change levy for taking a responsible environmental action. It is totally ludicrous.

Chairman: I am going to pass you over to our marketing expert on the Committee now because you were saying particularly at paragraph 87 that a good number of the problems facing agriculture and, by implication, affecting your industry relate to the consumers' demand for cheap food and marketing policies of the major retailers.

Q164  Mr Wiggin: In your submission, you say that the industry has invested heavily in communicating the benefits of the Lion Quality Standards to consumers. How do you communicate it to consumers and to what extent have you tested whether the consumer has understood the message?

Mr Parker: If I may come in here. There are two ways. The cost of the communication has been £16 million, which is really straightforward advertising telling the consumers. The other way in which we have communicated or communicated back from the consumer if you like is by carrying out research with consumer groups.

Q165  Mr Wiggin: What responsibility do the egg industry customers have in maintaining high levels of animal welfare and health and how should they put this responsibility into practice?

Mr Parker: When you say "the customers", do you mean the retail customers?

Q166  Mr Wiggin: In your submission, you have put that"... the marketplace has an important role to play in maintaining high levels of animal health and welfare. The egg industry's customers must therefore recognise their responsibility in this area."

Mr Parker: We have invested, as I say, £16 million in the Lion Code of Practice and it is obviously the first ---

Q167  Mr Wiggin: So, you have done your bit.

Mr Parker: We have, indeed, and we have spent a lot of money doing it. From a retail sale which was falling at eight per cent per annum, we have now levelled off and in fact Lion eggs are increasing whilst non-Lion eggs continue to decrease. So, there has been a huge benefit to the retailer and there has been a huge benefit to the ultimate consumer in that they now have confidence that they are no longer going to have salmonella enteritis in their eggs.

Q168  Mr Wiggin: What would you say was the problem with supermarket buying polices or are you happy with that as well?

Mr Parker: No, we are not. We are actually working with the NFU. We want to introduce a new code of practice for retailers and the main features of that will be payment terms, proper contracts, notice periods and a proper setting up of promotion, so that if there is packaging left at the end of a promotion for instance, that is actually taken care of, and also making sure that we produce and promote according to the production.

Q169  Chairman: One final question from me. At the pantomime which was the agricultural summit in March 2000, the Prime Minister gave an assurance, which you welcomed, that although the goose may lay golden eggs, we would not, as a government, gold-plate EU regulations. Do you believe that the Government have lived up to that in the three-and-a-bit years since then?

Mr Williams: I think we had a great scare recently and were very disappointed that Mr Morley should go out and consult so early on a ban on enriched cages just after the legislation was being implemented. We also have beak trimming, which Mrs Organ mentioned earlier. That was out-and-out gold-plating because the directive authorises it. Then of course on the organic standards - about two per cent of the UK egg production is to organic standards - the European regulation was gold-plated by the then OCROS(?). So, while that commitment was made, we have not seen it in practice and certainly, as we look to the future, our industry just cannot afford to have gold-plating. It is in an increasingly competitive marketplace and it is just the death knell of an industry and I should say a successful industry. We have done everything right and everything that has been asked of us and it is just that at the moment as we look to the future, we have this, as I call it, the so-called 'clean hands, dirty mouth' scenario. We export our welfare concerns and we allow eggs and egg products to come back in from systems which are banned from use here in the European Union and it is wrong.

Q170  Mr Wiggin: I have just heard that chicken farmers are being asked to insure against environmental damage now; have you heard anything about this? It may not be specifically to egg producers but it is to poultry farmers. If you could imagine that you are farming within a shed or a chicken house, do you not think that this is extra gold-plating that apparently is just going through at the moment?

Mr Williams: I am not aware specifically of what you are saying.

Mr Joret: Yes, it would be.

Q171  Diana Organ: You have put a catalogue in front of us of the welfare directives, the environmental regulation and the cost to the industry, but the one way out of it is to ask, how much will the consumer bear for egg prices to rise? It seems to me - and maybe I am being very simple about this - that one of the cheapest meals you can have is poached eggs on toast or scrambled eggs or an omelette and I do not understand why every student in Britain does not live off them though they would probably go around clucking! I am not going to promote the business for you, but it is a fairly wholesome, protein rich, simple food that Delia Smith taught the nation how to cook. Why can we not push the point that the consumer does not get eggs on the cheap but actually pays a price that would sustain the British industry, or is it that the consumer just wants to buy eggs so cheaply that they do not care that they come over from Thailand with all the crap in them?

Mr Joret: In answer to the first part of our question, one of our strap lines, was "fast food and good for you", so it is absolutely right. I can only quote from retail sales figures which show that over 40 per cent of the major supermarkets' sales are of so-called value or economy eggs which are caged-produced eggs and that varies of course from somewhere like, dare I say it, Hartlepool right down to somewhere where it is more affluent, shall we say, and obviously a lot more free-range eggs are sold in the more affluent places. At the end of the day, the consumers will decide. In front of them on the shelves, they will have all sorts of eggs produced by different systems and with different types of packaging and they make that choice and it is left to them to make that choice and we will respond and our members will respond accordingly.

Q172  Mr Mitchell: You should get Mrs Currie to front an advertising campaign, 'Live on student loans on an egg'!

Mr Parker: With respect, I did ask her to! Coming back to the point about the consumers, I did refer to the research that we do with consumers and there is no question but that what they want is a safe egg. They recognise the nutritional value of them and I am sure that they would pay more. Our research certainly says that is so. I think it inhibits what we have done if a food product is undervalued. I do not think it has been respected and I think it is one of the things that we are suffering from.

Chairman: Your probably need a latter day Saatchi who made a fortune on 'Go to work on an egg' which was fairly accurate and then went on to talk about Labour not working which was ---

Mr Wiggin: ... absolutely true!

Chairman: Thank you very much for coming along this afternoon. If you feel there are points which, on reflection, you would have wanted to have made, please write to us and they will be in the public domain as well. We are grateful for your time and interest and, if you wish to stay for the final session with your colleagues in the British Poultry Council, you are most welcome to do so, but thank you for now.

 

Memorandum submitted by British Poultry Council

Examination of Witnesses

Witnesses: MR DAVID JOLL, Managing Director, Bernard Matthews Ltd, MR ANDREW LEWINS, Chairman BPC Turkey Sector Group, General Manager, Primary Processing, Grampian Country Food Group Ltd, and MR PETER BRADNOCK, Chief Executive, British Poultry Council, examined.

Q173  Chairman: Good morning, gentlemen. We are very pleased to see you for our inquiry into the state of poultry farming. You are aware that we are looking carefully at the impact of new regulations on the industry and its competitiveness and on animal welfare standards and we are very pleased to see you here this afternoon. Can we begin by looking at poultry meat marketing and I leave it to you to decide which of the three of you answers the question. You report that, in the 18 years since 1985, production of poultry meat has gone up by 80 per cent to about 1.5 million tonnes and that consumption has outstripped that, increasing by 91 per cent to 1.7 million tonnes. You are aware that, fairly recently, concerns have been raised in the press yet again regarding the use of antibiotics as growth stimulators. How on earth have you managed to increase the production of poultry meat so quickly and in such a relatively short period?

Mr Bradnock: I was wondering if we might just be able to make a very brief introductory statement before we launch into the questions. First of all, I would like to introduce Mr David Joll and Andrew Lewins who are representing the turkey and the chicken sectors. Mr Joll, if that is okay, would like to make a very brief introductory statement.

Mr Joll: Chairman, I just thought that an overview might be useful to the Committee. We are obviously here today to represent the poultry meat industry and it is an industry that we are actually very proud of. First of all, we believe that we have been consumer driven, which we think is essential today. We have listened to the consumer; we have researched what the consumer wants to buy; and we have pumped millions over the years into product development to create a wide range of products that have demonstrated their success in the rapid increase in poultry meat consumption in all its forms. I would honestly say that we are a world beater in that respect. A number of British poultry companies have sold their technology around the world to other countries. We are recognised as having the widest range of poultry products in the world. So, it has been a very innovative industry, it has been an industry that has been prepared to pump money not only into product development but consumer marketing and generating consumer demand. The problem which the industry is facing is that a lot of the primary meat that is needed to produce those value-added products is flooding in from abroad and I think this is one of the major points that we would like to make today. An industry that has been self-sufficient, has not sought nor wished for any financial help and has been self-sufficient over so many years is very seriously today under threat. It is not that it has been trickling in in our industry, it has been quite dramatic and quite sudden. If we take Brazil, for example, who we certainly regard as a world super-agri business super power, their exports this year again are up 40 per cent.

Q174  Chairman: We are going to look at world trade later on. I am just looking at this area for the moment of the way in which you have been able to increase production of meat so quickly relatively in the last 18 years. You mentioned investment, research and so on.

Mr Joll: Indeed and there has been rapid investment and obviously huge investment in the agricultural side of our businesses. Britain is somewhat different from the rest of the world in that there are major organisations that we call vertically integrated, so we not only are processors and marketeers, but we are farmers as well on some considerable scale. So, by keeping the production in house, we have been able to produce that which is required and it has given us control and it has given us a lot of discipline over our farming methods. We have been able to farm in the best way with the best practices and we have been able to control that because they are in the main in Britain company owned rather than, for example, Thailand with tens of thousands of smaller farmer producer growers who clearly do not have the efficiencies of scale that the British industry in particular has. So, a huge amount of investment coupled with a great deal of technology and a high degree of control.

Q175  Chairman: Efficiencies of scale can sometimes tip over into other companies and the meat production is 80 per cent produced by just five companies, is it not, of which you are no doubt one. Yet, in your evidence, you express concerns about the adverse effects of the retail industry which similarly has about 80 per cent of sales concentrated in five companies. Why should it be good for you and not for them?

Mr Joll: Because, in the case of the retailer, obviously the retailer is there to sell what the consumer wants to buy and, as far as the retailers are concerned, they are not just dealing with that number of chicken broiler or poultry companies. They are dealing with a huge number of food producers because poultry's value-added products, using our jargon, are produced by a huge number of food companies in Britain, not just poultry companies, and of course it is a very competitive industry and therefore those food companies will buy chicken meat and turkey meat from the lowest cost source. So, the major reason why these imports are flooding in is that they have been bought by food producers to produce a wide range of value-added poultry products. It is not just the poultry industry by any means.

Q176  Chairman: Would your colleagues like to add to that? Bernard Matthews is at the very large end of the spectrum and other firms may not see it in that light.

Mr Lewins: The consolidation we have tended to rationalise as an industry partly because of our poor financial performance. Companies have got into trouble and therefore been bought and have consolidated to try and get the synergies and economies of scale within the United Kingdom. We are actually in the food market in that global village, as David said, for recipe dish, value-added meals, stuffed chicken that can come in at the frozen end of the market. That is a global supply issue and the fact that we have 80 per cent of the UK within five companies in no way leverages our selling power like that.

Q177  Chairman: In your evidence also, you say that your members have not noticed any reduction in the demands made on them by various supermarkets as a result of the cop on to market dealings with suppliers and you say that demands have intensified but that you are reluctant to give specific examples for fear of retaliatory action. Without giving the examples that you are reluctant to give, what practices contrary to that code of practice have the supermarkets used over the last 12 months to which you take such a strong objection?

Mr Bradnock: I should say that in the consultation that came from the Office of Fair Trading, looking at the first year of operation of this code of practice, we did discuss this in our management committee with all our members, both large and small, supplying retailers and this was the unanimous view of our membership - not one particular company or two particular companies, it was the unanimous view. One of the major areas of concern, I think, is demanding funds from suppliers to continue to be able to supply that particular supermarket in subsequent years. In other words you are buying business ahead on the basis of contributing to their bottom line in the current year on the promise of future business. There are a number of other areas that I am sure we could possibly write to you about, if that were possible.

Q178  Chairman: What would be a couple of key steps, if I can put this to you, Mr Lewins, that could be taken which would improve what appear to be unsatisfactory relationships between the supermarkets and their suppliers in this area? Any of you?

Mr Bradnock: I think we would like to see the code of practice have a bit more teeth, so that it is not a voluntary code and that it applies to all retailers in their dealings with their suppliers, and that there is also some person there who can actually impose some kind of quasi-regulatory requirements on supermarkets in the event of the code being breached or the spirit of the code being breached. At the moment it is pretty much a kind of list of things that if you had not thought of this maybe you could try this approach, which really lists a list of practices, which is more an invitation, it seems, than a deterrent.

Q179  Chairman: What enforcement powers or agencies would you envisage would be necessary or acceptable if there was this quasi-regulatory framework?

Mr Bradnock: It is difficult to put it in detail. I think we would like to see the Office of Fair Trading, perhaps, as the obvious area for this to reside. We would like to go into that in a bit more detail, perhaps.

Chairman: Can we move into the welfare area.

Q180  Mr Wiggin: To what extent do you believe that the UK welfare standards for poultry are more stringent than those in other European countries?

Mr Bradnock: Perhaps I could start. I think the main area here is that certainly the industry in the UK does take animal welfare very seriously indeed and it is very much part of the ethos of the companies producing birds because of the vertically integrated structure, which means that the ethos can be translated into action on a very large number of farms - from an individual company which may own 200 or 300 farms. That ethos, that approach, can be translated very rapidly into standards on the farms. That is certainly what happens. The other aspect of the remainder of the production is via contract growers which are under very strict contract to the integrated companies, and it is again very much the same approach there. The other aspect within the industry is the very close collaboration with the Farming and Welfare Council over a good many years at all levels of the industry, and welcoming work with the RSPCA in that area. We have assured chicken production standards and quality British turkey standards which go beyond regulatory requirements in a number of areas.

Q181  Chairman: You mentioned turkeys there, so can I come in on that question. One of the second-wave countries in EU enlargement is Romania. Is it still the case that Bernard Matthews have turkey interests in Romania?

Mr Joll: No, Chairman, not in Romania, Hungary.

Q182  Chairman: I do apologise.

Mr Joll: We certainly do have interests in Hungary.

Mr Bradnock: I think the other area is that the EU and UK legislation offers protection to poultry production both from the breeding point of view and in rearing, transport and slaughter. There is a legislative environment there that poultry fits into and it protects the welfare of poultry. We are looking at specific rules coming forward from the Commission very shortly on chickens and we welcome that approach because it will bring together all these different rules into a single body of rules. The other aspect, I think, is that there is no farm animal welfare legislation to speak of in most of the third countries that are actually exporting poultry meat to the EU and to the UK, and I think that has been very clearly demonstrated by the very recent report by the Commission on this matter. The other area is that there is a greater influence by the retailer in the UK on the industry and, indeed, welfare groups are very strong and very vociferous here and do have an impact on retailers and on the industry directly. I think all those points do mean that we have a much greater consciousness and action standards in place, higher than in most other countries.

Q183  Mr Wiggin: We had Compassion in World Farming giving evidence to us last week, and they came out with the fact that millions of UK broilers suffer from painful leg disorders, and their heart and lungs fail to keep pace with rapid body growth as a result of their being selectively bred to reach slaughter weight in 41 days. My understanding was that those sorts of statistics were history. What is really going on and do we have such poor levels of welfare?

Mr Bradnock: Certainly not. You mentioned leg issues there; leg health in the UK broiler flock is very good and we have very low levels of prevalence of leg weakness - less than 2 per cent by the latest survey that has been done, a very large survey, of the national flock.

Q184  Chairman: Would not 2 per cent of 800 million be 16 million birds?

Mr Bradnock: Certainly I think we need to look at it in terms of percentages. We are talking about very large numbers of birds, so even 1 per cent is 8 million chickens, so we are not saying that it is not a significant factor but in terms of prevalence and in terms of prevalence in relation to other livestock species it is improving all the time but it is, by any standards, very low. Compassion in World Farming mentioned millions of birds but not percentages or prevalence, and I think that is really what we do need to get down to.

Q185  Diana Organ: Why is it that your ACP code permits stocking densities to exceed those of Defra welfare codes? Do you think the public knows about this? You say, to the comment by Mr Wiggin about what is the real picture, we have heard about these problems with legs and broken wings and whatever, and yet your code accepts a density which exceeds that of the Defra welfare code. There has to be a problem, does there not? The denser the stock density, obviously, the more likely there is to be problems with welfare.

Mr Lewins: The Defra guideline of 34kg is now something like well over 30 years old. What the production codes of practice acknowledged was the work being carried out by Marion Dawkins out of Oxford University for Defra, a three-year study that is due for publication I believe next year.

Mr Bradnock: I think she is writing up this vast publication.

Mr Lewins: We will be guided and directed by that work that is coming out.

Q186  Diana Organ: You make it sound as though the density or the welfare standards set by Defra, because they were set a long time ago - the world is a different place for all of us. It might be for you and I, and 30 years ago we all lived with bigger gardens and more space and we have all now become more used to a higher density as human beings, but that is not the case with animal welfare. Just because it is old does not mean we can therefore push down the acceptable limits of welfare, does it?

Mr Bradnock: I think the situation has vastly changed over the last 30 years. From the point of view of the actual bird itself, the genotype is different.

Q187  Diana Organ: You mean it is a smaller bird? It is not a smaller bird though, is it?

Mr Bradnock: We are talking here about the actual capacity of the house to take a certain number of birds, a certain weight - we are talking about the weight of birds here. It is a combination of weight and numbers of birds but in the UK we talk about weight. In that time the genotype of the bird has changed but, also, the ventilation capacities, the design and the ability to manage the houses, the quality of the housing, the quality of the nutrition, the hygiene standards in the houses - all of that is a much better environment for these birds to be reared in now than it was 30 years ago, or even 15 years ago. So we really are talking about two quite different worlds. The 34kg was a rule of thumb at a time when there was very little or no ventilation in houses, and it is a totally different world now.

Q188  Diana Organ: I wonder if I could move on to something slightly different, although the same kind of thing. You and the British Retail Consortium and all sorts of people have been involved in all sorts of partnerships between producers and the retail sector about getting assurance schemes and quality schemes, to make it, effectively, easier for the consumer to think "This is a quality product", "This is a home-produced product", "This is something that may encourage me to buy this product", but we all know that there is a huge amount of difference between the specification that certain retailers will have on their producers and the specification in certain farm assurance schemes. How does the consumer work their way through these differentiated schemes? How can they think "That means I get this kind of welfare, and that means I get this kind of traceability, and that means I get this kind of product"? Does it help? Or is it so confusing that, actually, it is meaningless?

Mr Lewins: I think the assured chicken production standard which we collaborated on as an industry about three or four years ago was to address some of that confusion. We had probably not done very well as an industry about 10 to 20 years ago in that we had to be led by our first customer, the retailer, into various standards and codes of practice. We arrived at a situation where each retailer had its own particular code of practice, its own particular standard against which to award it, and that was adding cost and inefficiency, etc etc. We got together with the NFU and with the British Retail Consortium and wrote what we believe was a world-leading set of standards covering issues of food safety and animal welfare. All the retailers bought into that and now replace their audits with an independently audited scheme; it is a separate limited company, it is audited to EN45011 standards (?) and the way that was marketed was under the NFU Red Tractor launch. In terms of brand recognition, for the money that has been put behind that, that is one of the most successful brands the world has ever known, but it has had minimum money put behind it and it covers an awful lot of industries and an awful lot of products. Underneath the AFS2 body, which is just coming out, hopefully that will be a drip, drip, drip process. However, I take your point; in branding terms someone will recognise the Red Tractor but the housewife may not yet recognise the brand values of that brand. I think it is an evolutionary process.

Q189  Diana Organ: Has it helped to make your sector more competitive? Some people are saying "We would like to meet this assurance scheme and get involved with that" or "We have got to supply Tesco so we need that", but has it made it more competitive?

Mr Lewins: We have definitely become slightly more efficient because in the main the fresh, primary chicken cabinet in the UK is of UK production. Taking away all the different audits and all the different standards and replacing them with one, there has definitely been some efficiencies. There have, however, been significant costs in the industry adhering to those standards, be it in salmonella control, animal welfare or the stocking density issue; they are, nevertheless, baseline standards that were not in the industry four years ago, and I do not believe there is another industry in the world - and I travel it - that has a self-regulated a code of practice to that level.

Q190  Diana Organ: However, as you said then, that is to do with the fresh on the shelf. An awful lot of poultry is eaten or purchased by the consumer not as a fresh item on the shelf, it is in a frozen pack or it is in a processed or ready-made meal or it is in a sandwich - you can go on ad infinitum. So the differentiation of these schemes and the multiplicity of them means very little when you are going into Pret à Manger to buy a chicken sandwich, or you are going to buy chicken tikka masala made at Sainsbury's, because you are not even looking for that.

Mr Joll: I entirely agree with you, Mrs Organ. I endorse what Andy said and it applies to Quality British Turkey as well. From the research point of view, I can assure you the British consumer has got a lot more confidence in a chicken or a turkey produced in Britain, so the sheer fact it is registered as an assured British chicken or a quality British turkey - first point - does help a lot. Secondly, to carry that mark the meat can only be British - and we are with you all the way. The official policy of our Poultry Council is to have country-of-origin labelling. We think the consumer must have an informed choice, but I can assure you that no product can carry "British chicken" or "British turkey", obviously, unless the meat contained therein is of British origin.

Q191  Diana Organ: It is confusing. As a consumer and now looking at this inquiry, I am also the shopper for my family, and the barbecue season is amongst us so we end up buying packs of frozen chicken. I look at the back labels from various supermarkets and it is very difficult to tell if it is a British product because it says "Produced in the UK for ..." whichever main High Street store it is. What it does not tell me is where it came from, the country of origin, because "Produced in" means it was frozen and packaged in the UK but I do not know whether it has come from Brazil or whether it has come from Thailand, do I?

Mr Joll: That is absolutely correct, and I think the legislation needs to be amended. The legislation at the moment states that the meat can come from any country in the world but if the finished product is produced in the UK then, as the law is written, it is a product of the UK.

Q192  Chairman: Should British consumers be nervous if the country of origin is Brazil or Thailand?

Mr Joll: That is a very difficult question. The evidence, at the moment, from the EU is that Brazil leaves an awful lot to be desired. They have had three formal warnings, at least, in terms of their control - or absence or lack of controls. Of course, reference was made by the Egg Industry to nitrofurens (?). In the British industry there has never been a positive isolation yet, yet the country continues to receive positive nitrofurens from Brazil. In fact, the incidence in January this year was even worse than the months of last year. So there are some reasons to be worried.

Q193  Diana Organ: We are going to go to Brazil, but I think we probably will not eat their chicken. Have any of you done any research on the good old British consumer? When they buy a poultry product - and I do not mean just the fresh, I do mean the frozen, the processed and the multiplicity of ways in which you can purchase chicken - which is foremost: is it taste, cost, safety, traceability or country of origin? What is the real thing for them?

Mr Joll: I have to just tell you as it is, Mrs Organ, it is cost.

Q194  Diana Organ: Always cost?

Mr Joll: Way out front.

Q195  Diana Organ: So they do not care whether it comes from Brazil and it could be filthy and it could taste of rubbish?

Mr Joll: That is important but it is down the scale. When asked to rank, one to ten, in importance, one is cost.

Mr Lewins: I think as well, as a shopper yourself, our retailers have been hugely successful, and deserve their success, but people buy the retailer brand. When someone walks into the retailer they are buying safety by buying that brand. Once the housewife has made that choice, all of our work says that the number one purchasing decision is price.

Q196  Diana Organ: Last week when the British Retail Consortium were in front of us I asked them: the British Poultry Council reports that 90 per cent of UK chicken and turkeys are produced under the assured chicken production quality and British turkey schemes. My question to them was, what happens to the 10 per cent that is not? What happens to it? It is not covered, so where is it going, who is producing it?

Mr Lewins: With the BRC and the NFU, all the bodies, when we went into the ACP, as I said, there is a cost of doing that, approaching £300 a year to pay for the audit for the farmer, there are capital costs of upgrading facilities to get in there, so there is an element of the industry whose market does not request membership of the ACP, who therefore perceive no value in joining it. So that 10 per cent would typically find its way into wholesale or some food service outlets.

Mr Bradnock: A very small proportion would be organic production, probably not 1 per cent.

Q197  Diana Organ: So they are actually at the two ends: for the 10 per cent that are not in it, if you like, it is either because they have their own codes and are pricing themselves into a certain niche because it is organic, free-range or whatever, and the other, presumably is at the bottom end of the market that is producing?

Mr Lewins: It basically has free-range codes. As I say, it depends on the customer. If their market does not require it you can understand their reticence to come into the fold.

Mr Joll: If I can add an answer for the turkey industry, Mrs Organ, there are some turkey farmers who have written to me as Chairman of the British Turkey Federation complaining that the Quality British Turkey standards are so tough that for the 20-25,000 turkeys a year, which is not a lot, that they produce for the Christmas market they cannot afford to build buildings and have the systems that bigger companies like ourselves have. So I would not wish to say their standards are not good but they say that they cannot do the building standards, etc, that we can.

Q198  Mr Wiggin: You have made some very positive comments about the turkey industry, but Brandons, for whom I had a lot of growers in my constituency, did not make it. What went wrong with them?

Mr Joll: It is what I was trying to say at the beginning, Mr Wiggin, it is imports; the pound has been so strong for such a very long time now. We, as a company, are more fortunate, we have invested in branding and we have invested in value-added. The turkey industry is in desperate trouble where they depend upon oven-ready turkeys and turkey meat, and similarly for whole-chicken producers and chicken meat.. The pound has been so strong that it has been attracting imports into our country on a massive scale, particularly from third countries. We do not pretend to be fortress UK - not at all - and although the French industry was helped hugely in the 70s and 80s (we do not bemoan that now) the attack is coming from the third countries. There are two reasons: one is the strong pound, as I said earlier, and the second is that it is a lot easier in the UK to become established because the British supermarkets have got such strong branding of their own that it is easy to send meat to be packed into a British retailer brand, whereas if we were to go to another country in the world we have got to create a brand in that country. So we have, as a nation, very strong supermarket branding in the UK. It is economics.

Chairman: We would like to move into the area of environmental regulation.

Q199  Mr Wiggin: To what extent have environmental regulations helped to improve the efficiency of the poultry sector? Have they at all? In your submission you said "modern poultry breeds are also benefiting the general environment by halving the amount of feed and water needed ... and manure produced [per bird]".

Mr Bradnock: One of the effects of the selection process has meant a more efficient bird in terms of the use of scarce resources and, also, because it reaches market weight more quickly than the older breeds; therefore it is consuming less and excreting less of course. We are also seeing now, under the IPPC working with the Environment Agency, requirements to try and, if you like, make that bird even more efficient in terms of its feed so it excretes even less in the way of nitrogen and phosphorus and so on. So we are looking at - and this is coming from the Environment Agency itself - how we can reduce emissions into the environment of nitrogen and phosphorus. One way is by manipulating the feed of the livestock. It is very difficult to do that with birds or with animals that are free-ranging because you do not have the control over their feed to the extent that you do with indoor-reared birds. So this is something that is starting to come from the Environment Agency, and we are looking at that kind of aspect. You have to be very careful, of course, that you do not go too far in the sense that that can upset bone formation. We have seen some instances of this in other countries where the environmental legislation has caused some industries to reduce the amount of these elements in the feed, and with disastrous effects.

Q200  Mr Wiggin: I am going to ask you about the climate change levy in a minute, but I want to come back to the IPPC permits. How difficult is it for a firm to obtain that sort of permit? Do you think the Environment Agency is being very supportive? What you were just saying about bone formation - you can only push it so far so fast.

Mr Bradnock: In that particular case I think we are looking at how we can solve environmental issues, if you like, through the more efficient use of feed, and the modern breeds do assist in this area, of course. As far as the cost of the applications for IPPC permits for farms are concerned (included in farms, in processing plants and in feed bills, of course, just looking at the farming side of it, at the moment any new farm or substantially changed farm has to have a permit. All existing farms will come on stream requiring a permit by 1 January 2007, I think it is, which means that we all have to have our applications in by June 2006 for existing farms. So far, we have had four applications granted for, essentially, new farms (one was an existing farm with all new houses on it) and each of those applications took over four months to complete and provide the information required by the Environment Agency. If we multiply that up by the 1200-odd farms that we know about which are likely to require a permit, we are talking about 400 man years of work just to complete the applications. You can multiply that up yourself, as we have done in our submission, in terms of what that costs to the industry. I think the other aspect which is extremely concerning is the actual fact that we have to pay the Environment Agency a permit fee to lodge these applications; whether or not the application is passed or not we still have to pay this fee, which is going to suck something like £7 or £8 million out of the farming sector in the first year alone, and then a continuing amount of £3 or £4 million every year after that. That is gold-plating.

Q201  Mr Wiggin: Have you made an assessment of the costs of the climate change levy against the savings that have been stimulated by it? You have actually got quite a good story on your energy saving, have you not? Perhaps you would like to say a bit about that before we move on.

Mr Bradnock: Yes. With the climate change levy it is horrendously difficult to get the initial system set up so that you are looking at your business from a different angle - from the angle of energy use rather than, perhaps, productive output or the overall cost at the bottom line. I think it has been a very heavy administrative burden but I think it has benefited a lot of companies once they have got that system up now, and hopefully for the next milestones we will be in a better position - except that we have got the quick win so far, in the first milestone, but the more difficult ones are to come. It is quite a heavy target of 13 per cent for poultry farms and to get that over the full period will be very difficult for most farms in the later milestones because it will involve quite substantial rebuilding of houses, new insulation material - that kind of thing - in a lot of existing houses if they are going to succeed. I think, frankly, they are not going to. So that is something we would be very concerned about. With the first milestone you get the quick win but we would not like Defra to think "Ah, well, they can do better. We will up the target"; we should, if anything, be looking at reducing that target in later years.

Chairman: Underpinning your answers so far has been the reference to animal welfare, environmental standards and ethical trading quality being different in Brazil, Thailand and other countries. I want to bring in Austin now to examine this a little more closely.

Q202  Mr Mitchell: What proportion of poultry meat imported from Brazil and Thailand is actually coming from plants owned by British processors?

Mr Joll: OSI of America own Moye Park of Northern Ireland and the same parent company owns plants in Brazil. Apart from that link, I am not aware of any British company with a Brazilian link.

Mr Bradnock: I am not, either.

Q203  Mr Mitchell: What proportion of poultry meat imports does not meet the standards required of British production, in your view?

Mr Bradnock: I think we can probably say that just about all of it, in the sense that we are not talking about the production companies but we are talking about the competent authorities in Brazil which, by the EU's own inspectors, are incompetent; they are not providing the necessary checks and the necessary certification that is required of producers in the EU. That has been found and pointed out and reported in three separate visits to Brazil, and three separate reports, where they have said that the system of veterinary inspection and veterinary certification cannot be trusted (that is written in the reports) and the system of residue testing cannot be relied upon. That is quite clear because we still see, although they have diminished in the last couple of months, scores and scores of samples coming into the EU positive for nitrofurens, but we have not seen any Brazilian plants de-listed for breaking these fundamental food safety standards.

Q204  Mr Mitchell: The British Retail Consortium said that they sent people out to inspect - that is, British and overseas plants - and anything that does not meet their specifications is not acceptable to them. So there must be some coming in through other channels that are not produced to British standards.

Mr Joll: I think in the case of nitrofurens a lot of specifications that I have seen, Mr Mitchell, do not refer to nitrofurens at all. I think a lot of retailers are understanding this now and are trying to catch up very quickly and trying to close that loophole, but a lot of the imports are coming in and going to other food producers, as I said earlier, to be made into products within the UK and then supplied to the retailer. So that is not necessarily the retailer being responsible for the meat intake themselves. In addition, of course, a high percentage of imports into the UK are destined for the catering trade.

Q205  Mr Mitchell: Ignoring all the gobbledegook about welfare standards, would poultry meat be cheaper in the EU if we did not have the CAP?

Mr Joll: Arguably. Certainly within the UK, over the years, yes. Recently wheat has returned to more of a world level, but historically our poultry industries have been paying a protected price for what is our prime cost. For any poultry farmer or poultry producer the company's prime cost is the cereal - wheat in the case of northern Europe or maize in the case of southern Europe. Historically, we have all had to pay a protected price, so yes.

Mr Bradnock: In some cases it would be almost 40 per cent more than the world price for the main import cost.

Q206  Mr Mitchell: You argue for tariffs to check cheaper imports from third countries which do not meet the standards, which seems to me sensible, frankly. Is not the concomitant of that that poultry meat which is produced to EU standards should come in tariff-free? Do you think it should?

Mr Bradnock: I think there are different aspects of what you believe tariffs are for. In this case, again, we are not looking at tariffs to prop up an inefficient industry which is otherwise highly protective, which is certainly not the case. What we are seeking here is tariffs as a recognition of the particular social values that are represented in UK and EU legislation. That covers everything from employment conditions, environmental protection to animal welfare and general animal health issues. All of that is in the legislation, is reflected in the legislation, and what we are seeking is recognition that imports are not being asked to meet those social values. We do not see those in our imports, we only seek in imports food safety. If it is safe to eat we do not particularly ask where it has come from, or who produced it, at what price or at what social cost. I think that is really where we need to have some kind of tariff to recognise and underpin those social values.

Q207  Chairman: Mr Joll, Mr Bradnock and Mr Lewins, thank you very much indeed for coming along. Thank you for your written submission, which was admirably clear, concise and comprehensive, and your oral answers in this session this afternoon have shared those qualities. We are grateful for that. If you feel, on reflection, on the way back to work or home this evening that there are things you should have said or points that we misunderstood that you would like to have picked up had there been more time, please do write to us and that information will be part of the public documents associated with this inquiry. For now, thank you very much indeed.

Mr Bradnock: We have written and invited the Committee to visit poultry farms if you wish to do so.

Chairman: Yes, we are hoping to set that up. We are off to Brazil, but we are grateful for that offer.